KEC Gas Flaring Reduction Project

Location:

Project number:

44927

Business sector:

Natural resources

Notice type:

Private

Environmental category:

B

Target board date:

29 May 2013

Status:

Completed

PSD disclosed:

26 Apr 2013

Project Description

EBRD is considering providing a loan of up to USD 40 million to Kuwait Energy International Ltd (KEC) to finance its operations in Egypt and Ukraine, including the reduction in associated petroleum gas (APG) flaring, and capital expenditure for environmental improvements and for field development As part of the Project the Bank will assist the company in developing a company-wide approach to reduce APG flaring in its operations and in promoting equal opportunities in the workplace for women within the Company.

Transition Impact

The key sources of transition impact for the Project are as follows:

(i) Support of private sector development and increased competition in the project sector in Egypt and Ukraine;
(ii) Demonstration of new replicable activities through (1) investment in the reduction of APG flaring in its Egyptian operations, and (2) promotion of equal opportunities in the workplace for women within the Company;
(iii) Setting Standards for Business through the disclosure of payments to Egyptian, Ukrainian and other authorities in line with the principles of the Extractive Industry Transparency Initiative;
(iv) Policy dialogue effort with the Egyptian authorities to discuss comprehensive measures to reduce gas flaring in Egypt.

The Client

Kuwait Energy International Ltd, an independent upstream oil and gas company operating in Egypt, Ukraine, Russia, Latvia and other countries.

EBRD Finance

Up to USD 40 million Loan, part of a larger USD 165 million reserve based facility.

Project Cost

USD 40 million.

Environmental Impact

Categorised B. The environmental and social due diligence identified that KEC has sufficient Health, Safety and Environmental (HSE) management capacity at corporate, country and field/station level (in areas where KEC is an operator). The corporate HSE manager is based in Egypt, and is regularly visiting other assets including in Ukraine, to ensure that all operations comply with KEC’s corporate policy. KEC has in place procedures for the identification of environmental and social impacts and risks prior to entering new exploration area (including baseline studies and environmental and social impact assessments). KEC’s HSE management procedures for contractors are governed by specific contact conditions that include HSE requirements. KEC conducts regular inspections on their contractors and takes action where the performance of the Contractor does not comply with the contract conditions.

Implementation and enhancement of HSE requirements vary between the fields due to complexity of partnership agreements in Egypt. HSE performance is strongest at the fields operated by KEC and less at the facilities operated by other joint venture partners. While KEC makes a continuous effort to improve HSE standards at all fields, it is recognised that KEC can only operate within the remit of conditions detailed in the service agreement that is issued by the Egyptian government.

Under the Production and Exploration Services Agreement for Area A, the Company is responsible for abandonment of the field and has established a special fund. The on-going gas flaring reduction study by independent consultants will provide assessment of green-house gas emission reduction as a result of the EBRD investment. The study offers several solutions to reducing the flaring, the final decision will depend on KEC negotiations with the Egyptian Government.

Majority of the fields operated by the Company in Egypt are located in remote locations in the desert and therefore pose no risks to the community. The nearest town to the operational areas is Ras Gharib, which is 15 km away from Area A. The Company has established good relations with the community inhabiting Ras Gharib town and provides support to local schools, single parent family and low-income families.

The draft Environmental and Social Action Plan (ESAP) contains a number of actions for identified concerns; the ESAP will need to be finalised by the Board submission date.

Technical Cooperation

EUR 65,000 TC funding for Energy Efficiency to assess the potential for reduction in APG flaring on KEC’s main producing assets in Egypt and prepare an investment plan for APG utilisation and energy efficiency improvements.

Company Contact

Roger Philips
Chief Financial Officer
P.O Box 5614, Salmiya 22067, 6th Floor, Symphony Tower 2, Salem Al Mubarak Street, Salmiya,
Kuwait.
Tel: +965 2576 7700
Fax: +965 2576 7709
Website: http://www.kec.com.kw

Business opportunities

For business opportunities or procurement, contact the client company.

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Email: procurement@ebrd.com

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Email: projectenquiries@ebrd.com

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Text of the PIP

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The Project Complaint Mechanism (PCM) is the EBRD's accountability mechanism. It provides an opportunity for an independent review of complaints from individuals and organisations concerning EBRD-financed projects which are alleged to have caused, or are likely to cause, environmental and/or social harm.

Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.